tv Worldwide Exchange CNBC August 5, 2013 4:00am-6:01am EDT
you're watching "worldwide exchange." i'm ross westgate. shares in europe hit a two-month high boosted by pmi numbers in france and spain. a slight expansion. investors now waiting for hsbc. they report in the next 15 minutes. silvio berlusconi tells thousands of supporters he will begin to back the shaky
coalition. his firm trading higher on the deutsche bank upgrade. zblrj we kick off with the second reading of the eu services. private sector returning to modest gross in july. pmi suggesting the economy starting to stabilize. business expanding for the first time in 18 months. the market using composite purchase managing index up to 58.5 from 48.7 in june. breaks the 50 threshold for the first time since january 2002. headline figure revised up a tick from the permanent reading of 50.4. slightly better. that's just taken the euro/dollar to the best levels of the session at 132.89. below 133. trading tight ranges on
euro/dollar. joining us is jonathan tapper. nice to see you today. the pmi is now almost just about in expansion territory for europe. are you confident that we finally got -- after two years we finally got some sustainable growth coming back? >> i think that this is a cyclical upturn. we are seeing some improvement. varying perceptions. the research firm i run, work with, we have leading economic indicators. what's interesting, a lot of this upturn is improvement we're seeing, was really flagged beforehand by the upturn in some of the leading indicators we had seen. so yield curves, steep end in europe. particularly last year after draghi's speech where he said the ecb would do whatever it took. credit spreads have come in. credit default swaps have come in. real narrow money is growing. last year what we had seen in europe was that money was leaving the periphery.
in a way what we're now seeing with the pmis essentially had been well flagged by a lot of the monetary liquidity indicators we look at already. i think we'll probably see further improvement and i think what's important for investors to recognize is that this is a cyclical improvement. it's not a structural solution to europe's problems. the european periphery essentially is trapped in a single currency where the solution is essentially debt deflation. >> okay. just a cyclical improvement. suggest actually europe stays -- no or very weak economic growth. >> unfortunately, that's true. >> what changes? >> no. if you think about it, it's an improvement. in fact, whereas before they'd been contracting quickly, what we're seeing for some of these countries they're now contracting more slowly. anything below 50 on pmi implies contraction. >> what changes the picture? >> you have to see sort of more of the same. you'd have to see more money
growth in europe. you'd have to see sort of the yield curve steepen further. i think it's very difficult to see much improvement in europe. i think they'll wind up seeing further debt restructuring increase in portugal. i think that even though we're seeing some improvement in some of the labor indicators in spain, it's going to be very difficult to see how employment will be created. i think what we'll see is a reduction in the destruction of jobs. >> question is it's up to politics altogether? >> i think that's the other big worry. you could easily see political problems in europe. you have political problems in italy, in spain. obviously a strong majority. at the same time, they're sort of rife with political and economic scandals. you could easily see things turning down for the worst. particularly when investor sentiment now is extraordinarily bullish around the world. new highs in the s&p and elsewhere. >> you mentioned the rest of the world. the services sector appears to be stabilizing. services pmi steady at 51.3 last
month. unchanged from june. official reading looking a little better. data around over the weekend suggest china's official nonmanufacturing pmi up to 54.1 in july thanks to the government's aid to smaller companies. there's more headache for indian policymakers. that country services pmi suffered a pretty significant fall, hitting 47.9 last month from 51.7 in june. the first time that india's service sector has contracted since october 2011. the data further worsens india's weak growth outlook as the services industry accounts for nearly 60% of the country's economy. new zealand's dairy giant says sorry for the contamination of its milk products. speaking at a press conference in beijing the ceo says its priority is to ensure food safety. the company is working with chinese authorities to resolve the issue. china banned the import of some of new zealand's milk imports after fonterra found bacteria
that could cause botulism. fonterra shares down as much as 8.7% in the new zealand market early. it later pared some of its losses finning down 3.7%. let's check in on the first day of trading in asia. >> thank you, ross. mid session in asia today, with china markets leading the gates after the country's services sector stabilized in july. shanghai composite added over 1% to close at the highest level since mid-july. nikkei 225 was the worst performer in the region closing down 1.4%, hurt by a stronger yen. meanwhile south korea's kospy
lost .4% with samsung weighing on the index. australia's asx 200 eased ahead of the rba meeting tomorrow. on to top gainers. chinese shipbuilders surged on support of policies. the state council has announced a plan to improve and upgrade the sector to help ease overcapacity issues. china's state shipbuilding corp. and its unit soared some 6% to 10% in today's session. hong kong listed rong sheng heavy industry gained over 5%. china's dairy producers got a boost after new zealand's dairy giant fonterra contamination reports. china dairy producers gained es treem. biostein gained almost 10%. china modern dairy also soared nearly 10%. quickly in japan, earnings news still very much in play.
t toyota reported very strong q-1 earnings. also a very positive earnings report for isuzu for the nikkei. both ended in negative ter kory. casio bucked the trend. >> for now, thanks very much. here we are in europe with shares up near two-month highs at the moment. you can see advances outpace decliners by around about 6-3. something like that on the dow jones stocks 600. last week ftse 100 down half a percent during the friday session. right now up around .4%. x etra dax is fairly flat. ibex up about a third. bond yields, the big focus, of course, on u.s. treasuries. up near two year highs on
treasury yields before the employment report on friday. as you can see at the moment 2.61, kind of where we fell on friday post limit report as well. gilt yields very mobile. trading at 2.4%. services pmi coming out. there's a whisper number is going to be pretty strong in the next 20 minutes or so. as far as currency markets are concerned, dollar/yen, back down to 98.36 this morning after nearing 100 before the employment report. aussie/dollar down near this 34 month .12% as well. sterling dollar trading in pretty tight changes. meanwhile, leader of germany's left has urged the stp party to oust angela merkel in the upcoming election. the latest election poll estimates that on current voting intentions the left party could achieve a narrow victory by forming alliances with the greens and spd. under this scenario the green party remains king makers with
merkel's cdu and the csu block also needing their support for victory. meanwhile the spd's main candidate has ruled out a so-called grand coalition government. in an interview, he accused angela merkel of allowing the democratic rights of millions to be breached amidst incidents of spying by the united states. >> translator: a grand coalition isn't likely at all. spd will not be the stirrup holders of angela merkel again. we learned from that. >> a separate poll for r.a.d. public television has angela merkel set for coalition victory for the first time since late 2009 merkel's christian democratic union, bavarian sister party and junior allies scored 47% in the n voter intentions. thousands of berlusconi supporters gathered in rome sunday to protest the former
prime minister's tax fraud conviction. at the rally berlusconi reassured the public of the future of the coalition government saying it must continue. jules has been in milan. what are the wider implications now for the italian political scene? >> reporter: well, as expected, the coalition here stays together. berlusconi, to be fair to him, said all along his party needs to be cautious. some might say he's got maximum mileage, protesting his innocence, saying he's being pers kated. he's had five mps of his party threaten to step away from the coalition in the past few days. yet here he is saying the coalition needs to stay together for the good of the country. we need to wait and see in terms of the cause who gains from this. whether actually berlusconi manages to gain further support. i think the key point here, we've been making this point for the last week, the polls show neither party here would benefit from fresh elections. i think both parties know that. i think from berlusconi's point of view, too, we have to work
out what the sentence means. what we believe at the moment we're not going to decide whether he does community service or whether it's restricted at home until september 15th. it could take a further two months for that to be in place. up until that time, berlusconi is not going to be able to campaign anyway. i think he's very aware of that. ultimately the key point here is that the coalition will stay together. we can shift the view of politics away to the side for now, at least. but in terms of the reforms, it just complicates the issue. that's really what's crucial for italy right now and looks ever more difficult. the interesting thing, too, i think is that you have to look at the markets here. on friday potential instability in this country. yet the spread of italy to german bonds actually tightened on the day. we're so over, i think, bailout fatigue and political instability fatigue in europe right now. i think actually that benefits italy right now which has turned a blind eye. 100 days actually marks the day today of prime minister's government. difficult. back to you.
>> stay there. i want to get jonathan's view on this. to you think we're over, as jules says, sort of bailout fatigue and political fatigue at the moment in the markets? >> i think investors are fairly happy, fairly confident. look at credit spreads around the world. they've really been lower. a lot of stock markets around the world, they've surged. i do think most people feel they've put it behind them. i think it would be rather complacent, particularly when you have to have another round of bank stress tests before the ecb starts overseeing banks. i think unfortunately we will have to see further restructuring of greek and eventually portuguese debt. it's further ahead but it probably won't be a story for this week or next. >> how long do you think before that happens? the restructuring? briefly. >> well, i mean, to give a precise date is difficult. certainly within the next year or two. >> okay. jules, thank you. we'll catch you a little bit later. thank you. sorry. we've got to move on. we'll come back. thanks. let's turn our attention to lloyd's banking group. hopes to return up to 70% of the
bank's earnings to shareholders within three years. according to financial times, it was unveiled on a series of road shows as the lender tries to attract investors ahead of a sale of the government stake. shares in lloyds moving higher this morning up 3.7%. partner and ceo of market strategies, what do you think of that plan. >> for shareholders it's back to a bonanza, really. most banks have been guiding for higher payout ratios from 2014 onwards. we're going to be hearing from hsbc in the next few minutes. they'll be in the 40% to 60% range. lloyds pushing away head at 70% indicates a bank that has the wind behind it. well capitalized. most of its bank feels now under some sense of control. large market share. certainly their operating margin is improving. i think they have a good, solid three-year plan. whether it's appropriate for them to be paying out such a high ratio -- >> i was going to say, is that
what investors are going to want, 70% paid out? >> it feels an aggressive target particularly as we're only just coming through. memories are still very raw about undercapitalization of banks. one would sense that -- >> particularly in certain -- bank of england. >> absolutely. one feels at this stage a payout ratio as high as 70% is not required. certainly feels aggressive for this stage in the cycle at the moment. but it certainly means the share price, which has been the best performing share in the ftse 100 this year continues to march higher. analysts are really struggling to keep up pace with the sense of recovery at lloyds at the moment and valuation on the shares. >> do you have a sense of where, if we're going to try to flog it, what sort of price would be judicious? >> well, that's going to come down to market demand. >> yeah. >> increasingly you're starting to see particularly post the results that we saw from lloyds that the forecast for valuation are starting to move into the mid-80s up into the upper 80s in
terms of share price targets. it's certainly been happy to move up into that sort of range. thoughts of them taking a loss on this seem now far in the distance. >> just waiting for the hsbc numbers. as we do let's bring you into this. paul mentioned what is the right level of capital for banks. how much have we been caught between the, you know, regulators saying you've got to be safer, you've got to have more cash and, of course -- oh, we have got the hsbc. hold that thought. we have got the hsbc numbers. they report a pretax profit of 14.4 -- if i can find it. here we go. pretax profit, $14.1 billion in the first half of 2013. we were looking for something around 14 billion. up 15%. return on average ordinary shareholders actually 12%. underlying profit, $13.1 billion, up 47% compared to the first half of '12. underlying costs down 8% on the first half of the 2012.
mainly due to the nonrecurrence of provisions with fines and penalties. sorry. understand lying costs down 8% -- that's a repeat of what i just said. the net operating income before loan and payment charges and other credit risk provisions, $34.4 billion. it was 21.2. so that's -- sorry. i hate these things when they keep moving. income before loan and payment charges and other credit risk provisions of 34.4 billion was seen at 2.5. the operating expenses, 18.39 million versus 21 billion. a drop of 13%. paul, just a -- the share is down about 1% at the moment post those. now 2%. reaction? >> well, in terms of the
headline number, there are also many headline numbers to hsbc. feels like it could be just a touch light at the underlying profit level. so it's not -- certainly not a blow away number there. in terms of the operating costs, really some real focus here. costs got somewhat out of hand with hsbc over the course of the last two or three years. and they ideally want to start moving back into a 48%, 52% ratio for operating costs. so really we'll focus on that particular aspect. in terms of targeting, what are we looking for for the next two or three years? there are two areas. what sort of target can they give towards earnings per share growth. 8% has been indicated as a sort of target from hsbc from here to 2016. with a payout ratio in that, say, 40% to 60%, again, any indication from them on dividend payout ratios, that would imply an underlying yield of around 4% to 6% for the company to shareholders at this current
price. >> yeah. we'll see. this is, as you say, a little tis appointment, that 2%. the net profit was 10 billion. still looking for net profit of 10.53. slightly light. jon, let's bring you in on the capital aspect of banks. are you comfortable we've got enough? do we still need more? >> i think the european banks will have to raise about $400 billion of capital to reach their leverage targets. to me it seems crazy that banks aren't retaining more earnings giving that effectively there's a sort of public subsidy backstopping banks. a lot of the banks were nationalized. effectively, you know, the system sort of socializes losses, privatizes the profits. then when profits return, they then get dividended out to the private shareholders. it seems a bit crazy. that's sort of the upsidedown world we live in. >> yeah. do you agree with that? >> i certainly do.
it comes back to this point about when it is appropriate to start accelerating dividend plans at the moment. you know, the government has taken its position in its stock. it owns 39%. it will start to want to exit that position. so talk at the weekend, as i say, via the financial times, up to 7% payout ratio is not doing shareholders any harm at all, including the government and the taxpayer behind that. but as i say, i think it will come in for some criticism. if we were to -- the european crisis were to return in some shape or form which undermines the stability of the loan book, then, of course, that will beg the question whether it was too aggressive. >> hsbc comes out with this. >> i think this is potentially any imposition of bonus capping that is particularly on their investment banking side of the business. i know hsbc like a number of
banks have been contracting their investment banking book at the moment. as a result, there is a little bit of disparity in terms of the european legislation at the moment, what impact that may have on recruiting obviously the top players within the investment banking world. and because they can't operate either within a regulated environment within the banks or can operate quite comfortably outside. it means hsbc's competitive position in that world is going to be put to risk. >> okay. we'll take a pause. stick around, paul. jonathan, stick around as well. still to come on the program, more than a billion dollars was wiped off samsung's market value. coming up, we'll get reaction from seoul. egyptian court has ruled the leader of the muslim brotherhood is to face trial and charges of inciting violence. a reporter on the ground you outlines local reaction.
inauguration of iran's new president. ask if the country can deliver on promises to improve international dialogue. no budget bill. a debt ceiling looming and obama care set to go into effect within two months. congress goes on holiday today with a big to-do list. 11:30 we'll be in washington for the latest on the u.s. political agenda. [ male announcer ] it's time.
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samsung stock tumbled earlier today as it patent battle with apple took a new twist. the obama administration vetoed an import ban on old apple products in the u.s. for more we're in seoul. >> hey there. samsung electronics shares closed session down 1%. samsung can't appeal against this because the president was the final verdict. we do have an update. samsung apparently submitted an appeal to itc's ruling back in june which let apple off the hook on samsung's claims that it infringed upon some of samsung's patents. samsung is expected to claim that they are a commercial patent and not a standard essential patent that apple violated. now, while many say this could
lead to a protectionism war and could change the landscape of intellectual properties, the korean government has voiced concerns saying that it wants a fair decision from the u.s. the korean trade ministry will be closely watching itc's decision this friday where the agency decides whether to ban some of samsung's imports in the u.s. bear in mind, though, this itc decision could be pushed back a little bit. in the meantime, analysts here say the actual impact on samsung's short-term earnings won't be so detrimental because even if the itc bans samsung's products, it doesn't include the latest model, the galaxy s4. on the longer term the veto does give an upper hand to apple in the patent war making it more costly, possibly, for samsung electronics. remember samsung shares have lost close to about 20% in the last two months alone after jpmorgan and ing momorgan stanl the sales forecast on the s4. samsung also registered its patent for a smart watch last
month. it w with the u.s. patent and trademark. is the next patent war going to be on watches and wearable devices? who knows. we'll have to make a guess at this point. back to you. >> thanks for that. we'll keep our eyes on that. also, still to come, we'll take the pulse of the british economy. we're getting july's uk services pmi. there's a thought here it could be pretty strong. we'll find out right after this. [ kitt ] you know what's impressive?
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the head looips, hsbc disappoints with profits just shy of analysts. proposals to reform the banking sector would be challenging. could have unintended consequences. shares in europe up at two month highs. services pmi data out of europe suggesting a modest turn around. latest reading out of china marking a slight expansion. the world's biggest dairy exporter fonterra apologizes for contamination of milk products as the food scare forces new zealand into a multibillion dollar dairy trade. services sector pmi in the uk is strong. it's stronger than expected. growing at its fastest pace in six years.
market sip services purchasing manager's index 56.2 in july from 56.9 in june. highest number since december 2006. bigger gain than forecast by any economists polled by reuters. above 50 for seven months. tom vose head of economics at national australian bank. jonathan teper and paul are still with me as well. tom, what do you make of that number? >> amazingly strong. it seems you can't slow down the uk economy at the moment. it comes after the construction index reached 57. certainly in the morning session when the manufacturing pmis came out the uk was the fastest growing economy at about 20 until we got the u.s. data that afternoon. i think consensus forecast for q-3 gdp are going to be penciled higher. people will start gravitati gravitating .6% and.7%. upward revisions to growth forecasts for this year as a whole. i hope the strength continues.
we still believe we're seeing a short lived blip partly due to ppi repayments being made. perhaps some construction on the back of the help to buy scheme. if this continues into august, then the uk recovery story becomes firmly nailed on. >> the highest composite number since -- i want to get this right. since 1998. that's when the series started. >> yes. certainly, you know, every single almost of the series is at or around very strong numbers if not record highs. it's not just the services are doing all the heavy lifting as they did for q-2. we're seeing strength from construction, about 7% of gdp. also huge amount of strength from manufacturing. >> here's the thing. is it self-sustaining? >> i think, you know, we should get some strong day for august. that's our worry. yes, construction might get another fill up from the help to buy scheme. where does that leave us in the fourth quarter and first quarter of next year? we could be stealing growth certainly from the future. we still believe a lot of consumption at the moment has been due to ppi repayment.
>> what do you think? >> i do think that uk, we know, is sort of set to surprise slightly on the upside. i don't see any sort of strong, sustained growth. the uk still has a lot of structural problems. essentially a massive debt overhang. so it's unlikely that you're going to see a sort of structural boom in the uk. it's much more of a cyclical improvement. a lot of this also is driven by sort of improved housing sentiment. >> does this have any impact on the inflation report? it might persuade the bank to say actually we don't need forward guidance and is any more qe off the agenda? >> i don't know why anyone pays any attention to what anyone at the bank has to say about inflation. they've been persistently wrong for the past five years. >> it pays to be wrong. >> it's amusing to listen to what they have to say. get some popcorn and read what they have to say. >> tom? >> i think the future for qe will depend on the banks' ability to delink the uk gilt
market from the u.s. i think clearly forward guidance will be rates will stay lower for longer. would not be surprised to see a 3% inflation forecast in this month's inflation report. at least, perhaps, we might get back towards some transparency and honesty in forecasting. but i think whether we'll see anymore central bank purchases of gilts will be the success they have in delinking the long end of the uk gilt curve from u.s. treasuries. >> paul, interesting. i read here clients are doing a long ftse 250 and shorting the ftse 100 on the basis the ftse 100 is weaker global growth and uk growth is looking stronger at the moment. what do you think of that? >> that has been a very fair bet up until now. ftse 250 up around 20%. ftse 100 about half of that. ftse 100 is energy and mining related. q-1 and q-2 very weak sectors on a relative basis and absolute basis. but just in the course of the last three to four weeks i have sensed that those sectors are
hitting towards the top end of relative strength. you've got to be a little bit careful with that trade going forward. i suspect the gap is going to particularly close. the numbers we've seen today in the service sector i think just told you we all focus on that top line gdp number, it is giving you a sense of what is going on within government spending which clearly is under pressure. the private sector has been picking up the pace. this number is giving you more sense of that today. >> so that can continue. okay. paul, for now, thank you. tom, good to see you. thanks very much. paul vosa out of national australian bank. jonathan stays a little longer as well. good. european equities. up at fresh two month highs this morning. ftse getting a bit of a boost after that number. up a third of a percent. xetra dax. bond markets sort of really swinging around with treasury yields, u.s. treasury yields at the moment 2.61%. kind of where we finished after the session on friday. having been up near two-year highs near 2.75% as well.
and on currency markets, sterling is firmer. up 1.5354 post that data dollar/yen. euro/dollar still in recent ranges. hsbc numbers out this morn ing. stock down 3.36%. the ceo saying the pace of the sale of business is a retreat from some countries is now slow after 54 exit since 2011. focus undoubtedly been on the cost cutting. with that are you surprised by that stock reaction, paul? what does that mean for investors if you're looking at it longer term? is it an opportunity to get in or do you suspect more weakness? >> my sense is that you tend to get a fairly big reaction on hsbc stock. hsbc stock on the numbers, they come out during market hours. there tends to be this level of volatility. the bank sector has been strong. there has been this momentum over the course of the last few
weeks for really powerful outbeats. not just from uk banks but across europe as well. the sector has been relatively quite strong. therefore, it needed something like an hsbc to miss to take the top off what i refer to these shares. would i be buying? absolutely, yes. i think i'd be quite comfortable sort of adding into the weakness we're seeing. >> jonathan, before we let you go i want to get your view on there's still a debate going on with the fed and tapering and the u.s. economy. undoubtedly housing and autos as you said earlier are strong. should the fed regardless of what happens with employment start tapering? >> well, i think the fed shouldn't be doing quantitative easing right now. there's no direction connection between quantitative easing and the unemployment rate. it seems that in the 1970s there was the phillips curve where an economist thought there was a correlation between -- a relationship between inflation and employment. if you had higher inflation you'd get sort of better
employment, lower unemployment rate. now the fed seems to think if you can make asset prices lev at a time that will bring down the unemployment rate. it seems sort of slightly surreal scenario where you're looking at, for example, small cap, microcap stocks in the u.s. up 35% for the year. annual liz that, maybe they could be up 60% for the end of the year. trailing earnings, pes in the 20s for a lot of sectors in the u.s. what's clear is the fed essentially is distorting financial markets. i think that if there is any weakness later in the year, then the gap between where financial markets are versus reality -- >> if they do taper it will impact financial markets? >> testidefinitely. you look at the last two steep drug downs in the s&p. that was when the fed brought their buying programs to an end and paused. that was sort of the -- near the s&p downgraded the u.s. in august of 2011.
then the flash crash in 2010. so i suspect that we'd see something similar. >> jonathan, good to see you today. thanks very much to you for joining us. paul, stick around for a little bit more. got any thoughts or comments e-mail us email@example.com. australian prime minister kevin rudd called a september 7th election. the center left labor party is the underdog. launching five weeks of campaigning rudd said the australian economy could no longer be so reliant on china for growth. >> in the years we've been in office, we have helped keep our economy strong. while economies around the world have lost tens of millions of jobs, businesses in australia have added just under 1 million jobs over the last 5 1/2 years. while economies around the world have tumbled into recession, we in this country, australia, acting with business, have kept the economy out of recession. almost uniquely across the developed countries of the
world. >> the u.s. extending the closure of embassies and consulates in the middle east and africa as a precaution. lawmakers say the move follows an al qaeda threat they call the most serious in years. the state department says 19 u.s. diplomatic posts will be closed through saturday. although several would have been closed anyway for celebrations marking the end of ramadan. >> there's been an awful lot of chatter out there. chatter means conversation among terrorists about the planning that's going on. very reminiscent of what we saw pre-9/11. >> we need to protect the people who are out there representing us. we need to know and realize we're living in an increasingly dangerous world. and this specific threat that we've been briefed on over and over again has reached a new level. >> some of the 21 embassies and consulates that were closed on sunday will reopen today in places such as kabul, baghdad and -- the trial of the muslim brotherhood is to face trial in
three weeks time for crimes of inciting violence. joining us with the latest is youssef. >> egypt is preparing just like most of the arab world for a religious holiday. the holiday of eden. against this backdrop protests are still under way in two squares of the capital city of cairo. supporters of ousted president mohamed morsi calling for his reinstatement. perhaps trying to gain some level of leverage in ongoing negotiations. the political impasse remains between the supporters of the ousted president and the interim government. we've seen a flurry of unprecedented diplomatic activity in the capital. we've seen eu diplomats fly in the u.s. undersecretary of the united states william burns was here. u.s. senator john mccain and lindsey graham are both expected to hold talks as well. not just them. also the gulf countries, the oil
rich countries of the gulf, they have sent their foreign ministers, the united arab emirate emirates to try to broker in what is a high stakes game at the moment. as both continue in this political deadlock. remember that the ministry of interior was contemplating to break up these protests with force. and now it appears that they have taken a step back and will try the diplomatic route. also keep in mind that the economy here is still trying to grapple with this political standoff. the gulf aid, the $12 billion, is helping support foreign reserves. and also quite interesting, the market yesterday, despite the ongoing political uncertainty, up some 2.9%. that is a five-month high. also following the rate cut we had, unexpected rate cut on thursday, the central bank more worried about inflation or rather wor rid about growth than it was about inflation. >> yeah.
is there a sense that while we attempt mediation, that will prevent clashes between security forces and morsi supporters? >> reporter: well, ross, that is the hope. the reality is that the track record of both sides doesn't necessarily speak to that. we had some confrontations over the weekend with the exchange of some gunfire and tear gas as well. people have been injured. also in the sinai, attacks are still ongoing. so the tensions are still very high. but what the international community is clearly doing is pressuring both sides to come to the table. but at this point it doesn't look like there will be an easy solution because the supporters of the ousted president, they're saying we would like the old constitution back. and we want the head of the military to resign. sure. maybe not president morsi reinstated, but those two elements will be key. of course, the other side sees those demands and conditions as
impossible to implement. we have to wait and see who budges, who flinches, and how soon this can be resolved. >> yousef for now, thanks very much. we turn our attention from egypt to iran. the new president rouhani struck a different tone from his predecessor saying the company needs to be more open and transparent. nbc joins us from tehran. ali? >> reporter: that's right. he struck a very conciliatory note. he talked about mutual trust and respect, open dialogue with the west. he's talked about a more transparent nuclear program. having said that, he said iran is not going to give up its nuclear rights. but he has a very, very tough road ahead of him. he's inherited an economy which is in tatters. partly mismanaged by his predecessor, partly very badly hurt by economic sanctions. and he's got a huge domestic population here that's really under a lot of financial
pressure. so he's under pressure to deliver a term on the economy and abroad on the nuclear issue. he seems to be setting the right tone and giving the right signals. he's appointed a very moderate cabinet. some of whom have been educated in the united states, are fluent in english, are able to have dialogue with their counterparts without translators to pick up the phone. so these are all very good signs. but we must not forfwet he's not the top man in the country. the man who has the final say in the country is the supreme leader. everything has to go through him. so mr. rouhani can set the tone, set the mood. but he doesn't have the final say on all matters. it's been an interesting few months to see what happens now, how he negotiates when a nuclear goeshs program will restart. for him to turn this economy around the key would be making a deal on the nuclear issue. that's what everybody's going to be looking for over the course of the next few months. but i think mr. rouhani is going
to have a short honeymoon period as president. both domestically and internationally they're expecting him to deliver and deliver fast. back to you. >> ali, thanks very much for that. that's the latest from tehran. still to come on the show, how can iran's new president improve relations with the west? our guest says rouhani's leeway to do so is limited. more to come. [ male announcer ] these days, a small business can save by sharing. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's great. [ male announcer ] the best thing to share? a data plan.
so iran's new president rouhani has used his inauguration speech to promise a government of moderation for all iranians while also calling for international sanctions to be lifted. with expectations high of improving relations with the west u.s. offered iran an improving relationship. jamie, thanks for joining us. he's sort of -- he's made the right tones, i suppose, as far as the west is concerned in his inauguration speech. what will he have to do in reality to get the sanctions lifted. >> currently the tone is the most important aspect of what rouhani has done. yes, he has spoken about his willingness to engage with the
west. the west will command some sort of concessions before lifting any sanctions themselves. the first step really was the composition of the cabinet in which there was some pro-western figures. one notable example would be the foreign minister who was the previous ambassador to the u.n., has lived in the u.s. for a long time and has strong links to a lot of u.s. administration figures. so really it will be about can this person re-establish a working relationship with some of the people that he has previously communicated with. >> yeah. at the same time, how much control does he actually have over foreign policy? >> that's the issue, really. certainly foreign policy remains formally in the domain of the supreme leader. in terms of how much of an impact the president can have, this is where he will be advising the supreme leader. he will be talking to the supreme leader. and he -- the west will be hoping that he can influence the supreme leader so that he will make these crucial steps and allow rouhani to try and boost
relations with the west in order to get sanctions lived. >> you wrote in his notes when he got elected it was less likely since his election that any strike here, there would be in the military action. is that how you see -- is there a period of time, is there a grace period here? >> we're definitely going to see rouhani afforded a honeymoon period, really. whereby the west will be looking to see how he acts, how he speaks. whether there is any substance to the tone of his interactions with the west. whether he is actually willing to go beyond merely saying these words and actually providing concrete reassurance and actions that iran is not seeking nuclear weapons. >> how important will his -- are his appointments? >> well, again, this features into the tone of the rouhani administration. because as you quite rightly mentioned earlier, a lot of the key decisions will remain firmly
in the hand of the supreme leader. as we saw with ahmadinejad and his regime, a lot of the -- if the key figures are virulently anti-western in their rhetoric, then this reduces the chance that u.s. or european figures will see iran as a willing partner in any negotiations. >> the same time, we've seen the -- in the states the house of representatives pass a nuclear iran prevention act. this has still got to go before the senate and president. if it does get signed off, how will they respond to that? >> it will certainly be very unfortunate for iran if this does go through. because the supreme leader is very concerned about negotiations with the west. he doesn't necessarily see the u.s. as a body in which he can trust. certainly if this new law is is passed by the congress and then by the president, he will see this as proof that iran should not enter fully into negotiations with the u.s. >> yeah.
finally, what happens with oil production? >> well, that's -- that's crucial, really. iran's economy depends on oil production and oil exports. exports have actually risen a little bit in recent months from a low point. but iran still struggles to actually access the funds for which these are paid in. so they're accepting a lot of oil in return for bartered fwoo goods. gold, food stuff, these kind of things. it's not just the number of exports, the total exports they produce. it's also in terms of whether they can actually access the funding that they receive in return. >> jamie, thanks for that. have a good day, yaymy ingram, middle east analyst at ihs. now, japan has come out with some notes about their regulatory panel. it says the nuclear regulator fukushima water problems, and there are some -- an emergency is what they are talking about. being described as an emergency.
radioactive ground water has likely risen above tepco's underground barrier. we will keep our eyes on that. sticking with japan, the government assumingly hesitant in moving forward with its planned consumption tax hike. more on that. from the nikkei, the story from tokyo. >> hi, ross. yes. prime minister abe's administration will consult corporate executives and others from the private sector before making a final decision on hiking the consumption tax this autumn. the sales tax which is currently set at 5% is is scheduled to be raised to 8% next april. then to 10% in october 2015. the members of the government including finance minister aso are pushing for the tax hike to be carried out as planned since it is a key element in reducing japan's massive debt. some of the prime minister's closest economic advisers fear a raise could wipe out the positive effects of abe-nomics.
different tax rates and timing of the raise will impact a wide range of businesses. to assess the effect of the tax hike prime minister abe is expected to meet with a total of 30 to 40 private sector representatives as well as the bank of japan governor and other cabinet members. that's all from nikkei business report. back to you, ross. the aussie dollar hit a fresh three-year low today. the aussie/dollar at the moment .8907. this the rba chief -- still room for monetary easing as the country's inflation is benign. also on the agenda in asia tomorrow japan will mark the 68th anniversary of the hiroshima atomic bomb attack. also european equities as we head towards a break today have
been up at fresh two-month highs. very strong services sector number out of the uk a short while ago. just to remind you, the strongest since december 2006. in fact, the composite pmi now the best since 1998 which is when the series began. ftse up .4%. about a third percent higher across the rest of the piece. still to come, congress head off on holiday today. with a big to-do list in place, how will they get it all done before their deadlines? the second hour of "worldwide exchange" after this. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room.
welcome to "worldwide exchange." i'm ross west gate. hsbc disappoints with profits just shy of analysts' estimates. the bank also warning uk proposals to reform the banking sector will be challenging to implement and could have unintended consequences. shares in europe hit a two-month high. services pmi a mod egs turn around. latest reading out of china also marking a slight expansion. world biggest dairy exporter fonterra apologizes for the contamination of its mihmlk products as it threatening new zealand's multibillion dollar dairy trade. more than a dozen u.s. embassies and consulates will
remain closed amid threats some lawmakers call the most serious in years. if you're just joining us, state side, good morning to you. hope you had a great weekend. we saw the dow and s&p closing up at fresh record highs on friday. the dow up .6% for the week. right now just a little bit below fair value for the dow. the nasdaq is, what, two points above fair value. s&p about half a point below fair value as well. the ftse cnbc global 300 up about five points. pretty good pmi data out in china, for the eurozone, and the stunning number in the uk. service sector growing at the fastest pace since 2006. composite pmis the best since the series began in 1998.
x etra dax up 13 points. about .2% higher as well for the ftse mib and ibex up about a third at the moment. treasury yields, we saw that drop. up in the two-year highs before the employment report, of course, on friday. 2.75%. dropped to 2.6%. at the moment 2.61%. gilt yields a little bit lower. sorry. higher post that services number as well. spanish yields still around the 4.5% mark. as far as currencies are concerned, we saw sterling strengthen against the dollar. 1.5354. aussie dollar against the u.s. dollar down these 33-month troughs. dollar/yen a little weaker. below the 99 level. euro/dollar firmer but still very much in the recent ranges just below 1.33. that's where we trade right now in europe. we recap the first asian trading day of the week for us. >> thank you, ross.
asian markets kicked off the week on a mixed note as investors digest the weaker than expected u.s. jobs report. japan's nikkei 225 shed 1.4% today. really leading the losses in the region. exporters lost around on the back of a stronger yen. but china markets led the gates after the country's services sector stabilized in july. if you look at the breakdown of hsbc's services pmi data, new orders picked up to a five-month high thanks to beijing's supportive measures to reduce taxes and improve financing to small businesses. the official reading climbed to 54.1 from last month's 53.9. a number of corporate news moving stocks today. china's ban on some of fonterra's milk products gave a boost to hong kong listed chinese milk producers. china modern dairy and biostime gained almost 10%. a different story for one which sources raw milk from fonterra.
stock lost more than 3% after the food scare. in south korea, samsung electronic shares fell almost 1% today. this is after the obama administration overturned a ban on some of apple's older products, reversing an earlier ruling by a u.s. trade panel that favors samsung. back to you, ross. >> all right. thanks for that. we'll concentrate on hsbc. stock trading lower. europe's biggest bank posting a pretax profit of $14.1 billion in the first half. just shy of some analyst expectations. the bank also warned that proposals to reform the banking sector in the uk will be challenging to implement and could have unintended consequences. also talking about the dividend policies. there'll be no change in the policy on dividends. they're still targeting the 40% to 60% payout ratio.
he also talks about china. reform policy would create a more sustainable economy. paul is still with us. the last two comments. they're going to maintain that dividend policy. obviously compares to lloyds now a 70% policy. >> that's right. 40% to 60% is more than comfortable, i think, for the stock price where it is today. implies a 4% to 6% yield on the stock depending on how they feel, particularly if they want to be a bit more aggressive towards the top end of that particular range. but the numbers out of hsbc, there are so many moving parts. the sort of core you take away from this business is there's still more work to be done to scale back certain parts of the operation, reduce their operating cost. i think as that flushes out -- >> you talk about scaling back. they say they've exited or they've had 54 exits since 2011. that pace will slow. but they do expect more disposals in the u.s. loan book in the second half to speed the
runoff. work in a couple of tranks actions. >> the market environment at the moment is quite conducive to liquidating these type of assets. there's plenty of capital around the world that's been forced out of low risk bonds and is is looking for better returns at the moment. good opportunity for the banks to liquidate and take cost out of the business. that will drive the banking profitability of hsbc by 8%, 10% i suspect over the next three years. >> it doesn't mean we haven't got significant data flow today either. forecasts calling for a reading of 53.3. up about a point from june. analyst fed president richard fisher speaks about the economy and monetary policy 11:45 eastern. as for earnings, look for numbers today from tyson foods and fast food chain jack in the box. earlier jonathan tepper was saying it's down to fed policy's supportive asset -- he thinks they should taper anyway. that will impact asset prices.
you fearful of the fed easing up on its asset buying program? >> well, it depends how quickly they do ease up and how much control they still have over the long end of the rate market. i think it's fair to say that as qe has been around now globally for some years, increasingly asset prices have danced to the tune of qe. what that means is that particularly in the u.s. and europe the price earnings ratios that investors are willing to pay for growth has gone up. sustainable growth has been something -- that if it was trading on 10, 15 times, investors have been paying 20 to 25 times now on the basis that the relatively it's attractive to where the 10-year bond is. if they lose control of the 10-year bond i can see that doing some damage to price earnings ratios. stock market is a terribly emotive beast. if they can start to get relative value elsewhere it will just raeign back in some of thoe valuations. we may have earnings picking up some of that slack. the key question is how does
that period of adjustment manifest itself in markets. my suspicion as i say is that we may have another little dip back in valuations if they do lose control of those long end rates. >> which means a bit of volatility. u.s. equities up, you know, fresh record highs. the vix, volatility index almost at record lows at the moment. we often quite the forward looking vix. real vix, what's happening on the ground at the moment is terribly low. we're >> we're in that sweet spot of markets where nothing is going wrong. >> everybody should know you're about to go on holiday. when you go on holiday, things happen. >> it seems anyone goes away in august over the last six years will experience sort of the august period. so as i say, a lot of come play s -- complacency around at the moment. it's the nature of unintended consequences from the qe program
that will manifest itself somewhere at some point. >> don't stray too far from the phone. some of the other stories we're following today. u.s. is extending the closure of embassies and consulates in the middle east and africa by a week as a precaution. lawmakers say the move follows an al qaeda threat they call the most serious in years. the state department says 19 u.s. diplomatic posts will be closed through saturday. although several would have been closed anyway for celebrations marking the end of ramadan. >> there's been an awful lot of chatter out there. chatter means conversation among terrorists about the planning that's going on. very reminiscent of what we saw pre-9/11. >> we need to protect the people who are out there representing us. we need to know and realize we're living in an increasingly dangerous world. and this specific threat that we've been briefed on over and over again has reached a new level. >> some of the 21 embassies and consulates that were closed on sunday will reopen today in places such as kabul, baghdad.
new zealand's dairy giant fonterra says sorry for the contamination of dairy products. the ceo says its priority is to ensure food safety. with more, eunice yun is in beijing. hi, eunice. >> reporter: hi, ross. well, the ceo was definitely in full on damage control mode at the press conference. he said he deeply apologized for this inincident. he also had told me the chinese authorities did not, in fact, impose a blanket ban on all their products or their milk powder products as had previously been reported. this is what he had to say. >> what's being restricted in china? >> restricted is base powders for infant nutrition. which they use for blending purposes. but not the normal milk commodities which is the majority of the volume coming into china.
>> how confident are you that you pulled all of the various products that have been contaminated from the market? >> we have 90% out. we are recalling -- we are in a recall with our customers of 10%. that's a matter of getting it out in the next 24 to 48 hours. >> how do you plan to repair -- repair fonterra's image in china? >> we have to -- we have to work on this issue first. we are very transparent on what has happened. we work with chinese authorities, of course, nobody wants to be in this situation. but let's work on this first. and then work on what are the next steps in restoring the confidence. which i think should be possible because we are a big operation. we are there for more than 1 hu00 years. we are the biggest exporter. sometimes due to human error, some things go wrong. that's what we tried to correct.
>> china is a major market for fonterra. the company has been able to benefit from consumers' preference for foreign branded dairy products. especially when it comes to baby formula. the company also said that at this stage they don't see any impact on their financials. they can't disclose that at this point. they also said, though, they do not believe it will impact their expansion plans in china. ross? >> yeah. i mean, it's an extraordinary story. thanks for now. eunice, thank. that's the latest from beijing. george clooney has taken on hedge fund titan daniel lowe calling him a carpet beggar after he slammed sony entertainment saying their summer films had a -- speaking to deadline.com he said the fund manager had no idea how the business of hollywood worked. so in this little argument, who's the better bet?
daniel loeb or george clooney. he mail us. tweet at cnbc or direct to me. who knows hollywood business best? still to come, former italian leader sylvie owe berlusconi tries to ease fears about the future of the coalition government as his supporters hold a rally calling for his pardon. we'll be in italy with the latest right after this. [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection.
a recap of the headlines. if you just joined us, hsbc comes in shy of market expectations blaming tepid growth in europe and a slowdown in china. a court of new zealand's export market under threat as dairy company fonterra is sorry over contamination of milk products. u.s. looks set to keep embassies closed in the middle east and africa amid terror attack fears. german politics, the leader of the country's left has early morninged the spd party to consider an alliance in a bid to oust angela merkel in the forthcoming election. the latest poll estimates that on current voting intentions the left party could achieve a narrow victory by forming alliances with the greens and spd. under this scenario the green party would remain king makers with merkel's cdu/csu block also
needing their support for victory. the spc candidate ruled out a so-called grand coalition government. in an interview with germany's -- he accused angela merkel of allowing the democratic rights of millions to be breached amid incidents of spying by the united states. >> translator: a grand coalition isn't likely at all. spd will not be the stirrup holders of chancellor merkel again. we've learned from that. >> thousands of behr la coney supporters gathered in rome on sunday to protest against the former prime minister's tax fraud conviction. he assured the public of the future of the coalition government saying it must continue. jules has been following events in milan and rejoins us. does this change or not the landscape or italian politics? >> reporter: well, ross, it just makes it more complicated, doesn't it? the landscape is pretty bleak already. we know there's difficulties
keeping those two sides of the coalition on the same page and working together. having berlusconi with this conviction puts further weight on it. we've seen five of his mps suggesting they might pull away from the coalition. his party have also asked the president here for him to be pardoned. if the president did ultimately decide to do that, that would then create all sorts of tensions in the other coalition party who are already saying they don't want to be in a coalition with a convict. it's just layer upon layer, i think, of additional tension. ultimately what it keeps coming back to is the fact that you look at the polls here. right now neither party has any reason to rock the boat, as it were. we just have to keep watching that and see if one pulmos away. we also need to see electoral reform. otherwise even if we did go back to the polls we'd just be in a situation like february. back where we tart edstarted he. we did here from the prime minister over the weekend saying there's no point keeping this coalition together at all costs.
even if you think that berlusconi as a result of this conviction is going to pull away from politics in some way, the suggestion here still is that he's very much an influential player and will continue to be so. so coalition limps on. question mark over the ability to enact reforms. for now, ross, back to you. >> thank you. the latest from milan. in iraq the new president hassan rouhani says the country needs to be more open and transparent. nbc news's ann curry was in iran. >> reporter: on iran state television, the transfer of power of mahmoud ahmadinejad to hassan rouhani appears full of goodwill. we never heard this from ahmadinejad. >> translator: the only way to engage with iran on issues is to build trust on both sides. a mutual respect and by lowering tensions between each other. >> reporter: perhaps as significant as the new president's message is today's orchestration of the
international press. this inauguration has turned into a world press event. really only for one reason. the world is worried iran could soon have the bomb. and iran gave the media a show. its modern parliament a setting for a television spectacular. for the first time, heads of state from all over the world were invited. with the notable exception of the united states and israel. while afghanistan's karzai and a top official from north korea were in attendance, heads of state from western europe were not. after his remarks, president rouhani immediately named his entire cabinet. most fellow moderates. he was clearly signaling the direction he wants iran to go. and how fast. ann curry, nbc news, tehran. >> still to come on the program, valuations in emerging markets look cheap. with taper in the u.s. on the horizon, what's the impact likely to be on ems? is there money to be made or not? we'll get into that. as we do so, reminder european
equities on the first trading session of the year -- week, i should say, are firmer. we'll be back in a few moments. [ male announcer ] it's time. time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪
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s&p implied open down a point. six points for the dow and nasdaq up just one point. at the same time, u.s. treasury yields, although nearing two-year highs on friday before the employment report up towards 2.75%, currently 2.6%. where u.s. market rates have been going has had a huge impact, of course, on emerging markets. chief executive officer at advantaged emerging capital joins us now. slim, the last three years for emerging markets is one of the biggest, you say, period of underperformance since 1994 to 1998. it's interesting we start with 1994 because that was when, again, there was this big backup in u.s. bond yields. >> yeah, yeah. and that's basically what markets seem to be pricing in. our view is that emerging frontier markets altogether, growth markets, they are far better today than they were back in the early '90s. we think making any similarities
with '94 is rather unfair. and we don't see the same kind of -- >> nevertheless, we have seen -- we saw this in june. you know, this backup in yields. a big sort of escape sort of out of em. i presume it's not helped either by the fact we've got big gains in u.s. equities and japanese equities. people deciding that's just a better place to put my money. >> exactly. a bit of a double whammy. what you've seen is outflows from em going into japan and u.s. also outflows from fixed income and bonds. it's both sides of the equation. and, yeah. people are -- i think a lot has been priced into markets, emerging markets anyways. >> i was going to say, what happens next? you say there's some countries here, some areas are going to do better with high u.s. rates than others. >> from a top down macro point of view the less vulnerable countries to arise in global
rates would be those that are savers. the likes of korea, the gulf, russia. contrast that to the likes of south africa running current account deficits. that's the way to view things in the short term, all else being the same. >> that includes the likes of brazil will also find it much tougher going. >> yeah. brazil, turkey, yeah, south africa. all these countries have been running current account deficits. if the cost of capital increases, then it wouldn't be great for them in terms of filling up the gap. >> they've also been, you know, two years ago there were -- a year ago battling a weakening dollar. now they're battling a strengthening dollar. >> yes. >> nothing's ever good. >> the stars have lined up the wrong way for the last 12, 18 months. i go back to valuations. a lot has been priced in. the analysts have been downgrading the gdp numbers and earnings numbers for the em space. so we do think that we should be closer to the bottom. and on the relative basis, em not as cheap as they've been for
a long time. >> you believe we're close to the bottom for em. which is the area you now think is an opportunity if you see one? >> from a -- stock picking remains the way to go, frankly. but from a top down point of view, countries like russia, i mean, everything has a price. that remains the cheapest country. i mentioned that a hike in rates, u.s. rates, won't be as bad for them as others. but we do like the domestic story. we like places like turkey where you have a domestic consumer. we're looking closer at mexico. it's just that it's just too expensive. but there is certainly a positive change in mexico. >> slim, always good to talk to you. thank you very much. chief executive officer at advanced emerging capital limited. still to come on the program, a survey of nearly 2,000 accountants say global business confidence as its highest in two years. coming up, we'll find out why with one of the survey authors.
suggests a modest turn around. latest reading out of china also marking a slight expansion. very strong numbers out of the uk. the worldest biggest dairy exporter fonterra apologizes for contamination of its milk products as the food scare threatens new zealand's multibillion dollar dairy trade. more than a dozen u.s. embassies and consulates in the middle east and africa remain closed this week amid threats some lawmakers call the most serious in years. all right. if you've just joined us stateside, very good morning to you. we saw fresh record closing highs for the s&p and dow. right now futures indicating pretty flat start, really, for u.s. equities. also, of course, two years since s&p downgraded united states, in which time the s&p has been up
some 52%. dow 44%. nasdaq up around 56%. european equities up at two-month highs at the moment. strong pretty good composite numbers for the eurozone. really strong numbers for the ftse 100 today. services pmi at the best level since december 2006. composite number at the best level on that pmi since the series began back in 1998. the ftse today up 11 points higher after gains of 1.4% last week. xetra dax up a quarter. flat for the ftse mib. ibex up a third. what are investors to do with this fresh trading week? here's a recap of some of the thoughts from our guests that have already been on cnbc today. >> i think from a very short term perspective, i think we need to think about sterling today. particularly with the services pmi. a lot baked in. i think people may be expecting too much of a revolution from the economy on wednesday. there could be sterling disappoint over the next couple
sessions. >> we're still waiting in japan. about 16%. you have a normal 40% rise. it's pulmoled back a bit. clearly more legs there. the next thing, 115 to 120. that looks quite good. >> we do believe the front end given the central bank activity and the central bank -- buyers could be a good place to play. generally speak ing ifyou look into the long end of the curve, that's where the credit component is really strong. you have to be careful that. i really do expect a lot more reassessment to go on there. >> some of the thoughts we've had. we're going to get more now. a survey of more than 1,800 accountants concluded business confidence is at the highest in
two years. joining us is senior economic analyst at the acc. you say global recovery is in sight. how in sight is it? >> thanks for having me, first of all, ross. when i say in sight, what i mean is we have the best confidence figures we've had for about two years. we've had the best improvement in confidence figures in the last three years. so that's really quite encouraging. but the figures themselves are not what's important. what we think is much more encouraging is that they're accompanied by a surge in investment and employment. much more dynamic global economy. and also confidence figures now are much more firmly aligned from the mentals compared to the last quarter. >> the problem as you say genuine recovery is only at the moment confined to north america and africa. not much of the globe, is it? >> it's not a recovery for everyone. but the surge in dynamism is actually why it spread.
part of it we suspect has to do with where monetary policy is going around the world. so in the last quarter we basically saw easing policy in a large number of markets. that reflected in our own survey where you see that access to growth capital has become better according to what our members and the ima members are saying. pretty much around all of our major markets. >> yeah. so it's -- okay. so it's -- it's because of monetary policy. what happens if there is a -- it's perceived that that policy isn't going to stick around that long? >> what happens if essentially we have an equivalent of the taper debate elsewhere in the world? >> yeah. >> that's true. we're hoping to see, you know, one or two more quarters of sustained recovery in confidence and investment. but in fairness, the kind of recovery in investment we've seen so far and employment is not something we've seen before on the basis of -- >> this is a really key point, right? people using this phrase escape
velocity. whether it's about the uk or u.s. or whatever. sustainable period of economic growth rather than a cyclical upturn. the key to it being sustainable is clearly companies investing more and creating more long-term jobs, not short-term jobs. so is there signs that we're starting down that path? >> well, there are signs. i mean, i don't want to overcommit here. >> yeah. okay. >> what i would say is that we see that business opportunities are on an upward trajectory. and where you have an increase in genuine opportunities for organic growth and a more accommodative policy environment, then, you know, if you can see that sustained for one or two quarters, it's a good sign. it's a very good sign. >> what about you've been surveying as well -- trying to understand how firms feel about china's liquidity crunch and what's going on in china. what is the feeling about that? >> we were very careful to look into the findings this quarter. because as you know better than i do, there's been predictions of all sorts of apocalyptic
things happening in china. we saw business confidence take a dive. we saw a dent in firms' ability to access finance. we saw nothing like the kind of -- the kind of downturn that people were predicting. what we do know, however, is that confidence has been dipping consistently in china over the last few quarters. as evidence of the slowdown that we've seen from obviously more objective figures as well. and we know now that a new development is in the area of fiscal policy where our members have started to expect fiscal expansion to slow in china. so government spending to slow down over the next -- in the medium term. >> it's good to see you. my takeaway from this, okay, there's grounds for optimism. we've still got to prove a bit. right? >> of course. >> good to see you. senior economic analyst at acca. apple scores the latest victory in its long running fight with rival samsung as the obama administration overturns a ban on the import and sale of some old iphones and ipads.
i've got some of those. bertha is with us from cnbc hq in the united states. bertha, does that mean i won't be the last person left with an ipad 1? >> no. you will not. you will not. i have -- i have an ipad 2. it'll be tough getting servicing in a couple of years. you know, these things end up obsolete. nonetheless, the international trade commission had imposed the ban in june on the import and sale of iphone 4, 3 gs, ipad 3g and ipad 2 distributed by at&t. the itc ban was specific to a samsung patent covering technology allowing devices to transmit multiple services simultaneously through 3g wireless networks. while the apple products in question are more than a wreer old, some likely iphone 4 remain solid sellers. on saturday u.s. trade rep michael froman said his veto was partly based on the effect the
itc ban would have on competition in the u.s. economy and on consumer. he says samsung can still pursue the case in court. we know they probably will. in a statement, samsung says it's disappointed in the itc had, quote, correctly recognized the company had been negotiating in good faith. south korea's government today says it's concerned by the reversal of the ban and the move is being criticized by south korean media as protectionism. as for apple, it says it, quote, applauds the administration for standing up for innovation in this landmark case. samsung was wrong to abuse the patent system, unquote. the itc is designed to be a trade panel. but it's become a popular venn withdrew for patent suits because it makes rulings rather quickly and can impose import bans which are harder to get through the courts. apple has a similar complaint pending against samsung at the itc accusing its rival of copying technology on the iphone and ipad. final decision is expected on friday. samsung fell about .9% today in
seoul. losing more than a billion dollars in market cap. checking apple shares in early trade in germany, it looks as though they are right now up about .5% or so. somehow, i don't think these guys will ever, ever stop fighting one another in court, though. i can't imagine there'll ever be some settlement they both agree on. >> i was just wondering, because in that proposed omni con merger, i wonder who will leave first. one other story here i know you're interested in, okay. hang on a second. we'll come back to you. because as we know, george clooney has taken on hedge fund titan daniel loeb calming him a carpet beggar. this is after the activist investor slammed sony entertainment saying their summer films had bombed sec tackularly. speaking to deadline.com clooney said the fund manager had no idea how the business of hollywood worked. clooney's smoke house pictures
has a production contract not surprising with sony picture. we've been asking who's a better bet, george clooney or dan loeb? matt writes in, clooney is talented. loeb is smart. jay shoeman said both loeb and clooney think they know hollywood business. it's the guys who sign clooney's checks that do. bertha, we need someone special to follow up on this story. i just wondered whether you'd kind of be interested. >> i will take one for the team and go interview george clooney in lake como. i know it would be a rough assignment, but i am ready to do it. >> you sure? you sure about that? >> yeah. yeah. you know, i've got my little to-go bag ready to go under the desk. i know it's a rough job, but somebody's got to do it. >> okay. thanks for that. we needed a volunteer. i wasn't sure whether you'd go
with it. good stuff. always good to see you. thank you so much. >> you, too. goldman sachs in the london's metal exchange have been named as codefendants in a u.s. class action lawsuit over the storage of aluminum. the suit claims they engage in anti-competitive and monopolistic behavior in the warehousing market in connection to aluminum prices. goldman says the suit is without merit, noting prices have fallen 40% from their peak in 2004. the stock today unmoved in frankfurt. shares of hsbc very much trading lower after europe's biggest bank posted a pretax profit of $14.1 billion in the first half. shy of analysts expectations. muted growth in europe and slowdown in china weighing. the firm also barned british pro poseales to reform the banking structure could challenging and have unintended consequences. berkshire hathaways second
quarter profits beating forecasts. the company which released results after close on friday is benefits from an improving u.s. economy notably in the energy, railroad and car insurance business. berkshire also got a boost from gains on investments and derivatives. the class a shares closed up half a percent on friday to $176,500 a share. still got to pinch yourself when it's that much. still to come, congress gets out of town, leaving washington for their month long summer recess. but lawmakers have quite a lot of issues to tackle when they get back and not much time to do so. we'll look at their full agenda this fall and ask whether any deals will get done. [ male announcer ] come to the lexus
the u.s. is extending the closure of embassies and consulates in the middle east and africa by a week as a precaution. lawmakers say the move follows an al qaeda threat they call the most serious in years. the state department u.s. diplomatic posts will be closed through saturday. several would have been closed anyway for celebrations marking the end of ramadan. >> there's an awful lot of chatter out there. chatter means conversations among terrorists about the planning that's going on very reminiscent of what we saw
pre-9/11. >> we need to protect the people who are out there representing us. we need to know and realize we're living in an increasingly dangerous world and this specific threat that we've been briefed on over and over again has reached a new level. >> some of the 21 embassies and consulates that were closed on sunday will reopen today in places such as kabul and baghdad. two years ago today s&p cut america's aaa credit rating after congress failed to raise the u.s. debt ceiling. a deadline that looms again in early november. s&p's downgrade came after the close on a friday. on the following monday the dow fell 635 points. 5.5%. s&p fell 6.6. nasdaq dropped nearly 7%. since then investors at no time -- didn't appear to lose faith. downgrade? who cares. but the debt ceiling, of course, just one of several issues
congress must tackle when lawmakers return to washington next month after their summer recess. they've got to pass a continuing resolution to keep the u.s. government running. the farm bill and other spending measures as well as address items such as immigration reform. sarah fact sarah fagan. political director under president george w. bush as well as a cnbc contributor. the list is endless, sarah. good to see you. look, they're off on their holes. there doesn't appear to be an awful lot of time when they get back for the run of measures that they've got to squeeze in. what goes? >> well, you know, we keep seeing this same movie over and over with congress. you know, i would expect that as soon as they return, they will pass a continuing resolution to keep the government funded for a short period of time. and all attention will focus on these big three spending challenges. a long-term budget, the sequester which remains a
challenge here in the united states, at least for many members of congress, and also the debt ceiling as you pointed out. so that is going to take up almost all of the oxygen in september. probably much of it in october as well. i think you'll see domestic priorities like immigration, patent reform, other topics that the congress has been focused on punted until, perhaps, november, december. if they have time to do them at all. >> we get a continuing resolution passed, where does that then lead us on the idea of a grand bargain? and where -- will that get us any closer to an agreement on spending cuts? >> well, i think this becomes a function of the speaker boehner, the house speaker's playmanship, so to speak. is he going to be able to get all of these spending discussions wrapped up into one package. and if he is, republicans have a much better chance of keeping this debate focused on spending
and spending reduction. and we've seen the president's signal in recent months. a willingness to go where he hasn't gone before, which is a grand bargain. to do that essentially, you've got to do some combination of significant tax reform including corporate tax reform. but also entitlement reform. we saw yesterday many members of the house and senate talking about the need, again, for entitlement reform. so i do think it's possible we'll get there. and that's what will be required to sort of make all of these challenges fit nicely and pass into one package. >> yeah. to get an agreement they're going to have to negotiate on the debt ceiling. that doesn't seem likely. >> well, both sides are fairly dug in on the debt ceiling with the president saying he's not going to negotiate period on it. that congress needs to pay its bills.
you know, where republicans say, look, it's important we have this debate. we can't keep spending money that we aren't taking in as a government. i do think the president's position is a false choice. to somehow suggest that if you don't raise the debt ceiling, there's no possibility to pay bills doesn't make sense. the u.s. government has enough cash flow to sequence payments, to pay interest on the debt and other critical measures. so i do think that, you know, even if the -- congress doesn't agree on a debt ceiling we're going to be able to find a way to keep paying our bills until they come to some grand negotiation, grand bargain, if you will. >> all right. are you off on holiday if washington closes down? are you off on holiday? do you sink it in? >> no holiday. august is always a busy period for people on the other side of the lobbying community. >> okay. all right. you catch them with the pina
coladas. sarah fagen. hsbc comes in shy of market expectations blaming tepid growth in europe and a slowdown in china. a court in new zealand's export market under threat as dairy company fonterra says sorry over contaminated milk products. and the u.s. to keep embassies closed amidst terror attack fears. [ male announcer ] these days, a small business can save by sharing. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's great. [ male announcer ] the best thing to share? a data plan. at&t mobile share for business. one bucket of data for everyone on the plan, unlimited talk and text on smart phones. now, everyone's in the spirit of sharing. hey, can i borrow your boat this weekend? no. [ male announcer ] share more. save more. at&t mobile share for business. ♪
a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ the services sector growing at the fastest pace in three months. pmi for the region up from 48.3 in june. better chan expethan expected n. britain's services sector
recorded the strongest fwroet. up to 60.2. highest level in over six years, before the financial crisis. european equities ahead of the u.s. open are trending a little bit firmer right now. quarter point for the ftse 100. in spain. a lit flatter in italy. u.s. futures indicating a fairly flat start right now. ben, very good morning to you. we saw a sort of a late stage rally on friday. how do you see us set now with the s&p up at fresh record highs? >> i think that it's business as usual for the most part. i mean, that's what we're really seeing and hearing from traders and investors alike. again, after a lot of information received last week, a lot of dust to settle if you will this week, i don't think we've really seen the market reaction to all that information. again, we're talking about gdp, fomc, unemployment numbers coming out on friday. this usually takes a couple days to filter through the market. but for the most part, again,
higher highs and higher lows is what we're seeing across the board. we have the s&ps as you mentioned at record highs. new year highs across the board s&ps, nasdaq and the dow. the one thing i want to point out is that friday, ail bee it it may not be a major significance, russell unable to trade up above thursday's highs. definitely something to keep an eye on. if you take a look right now we're well up above the may 22nd highs across the board in all four of those majors. s&ps, nasdaq, dow and russell. i think that's a significant level now. again, for the most part traders i've talked to really continue to see this buy trend continue. >> yeah. it's kind of interesting because we undoubtedly saw on thursday, you know, a number of things. the stronger data having a positive impact for stocks. the fed and the employment report having a weaker impact. as you say we've got to digest which is the one we think we run with. >> well, you know, for the most part the markets really run with both of them, if you will. it's an odd situation that's
been developing. but the weaker data just convinces traders that the tapering is further and further out. and the stronger data is just fuel for the fire, if you will, that the economy is getting stronger. so in that sense, stocks have really been benefiting from both sides of that coin, if you will. it's a little bit unusual and we're not sure how long it's going to continue to play out. unfortunately, i think a lot of traders who have seen situations developing like this in the past can really predict that it's going to be ugly and very inefficient, if you will, once it does play out. but, again, that's the guessing game at this point. it's anyone's guess when that will happen. if you take a look at the monthly s&p chart, you know, basically over the last year, it's straight up. there's been no correction whatsoever for the most part. >> yeah. >> you know, again, it's a guessing game at this point. >> ben, good to see you as always. have a good day. have a good wake. tradersaudio.com. that's it for today's "worldwide
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good morning. today's top stories, investors pouring money into equity funds last mobt month. they're it it at record levels. in europe, hsbc shares slipping as the bank's profit disappoints. back here at home the obama administration overturning a ban on ipads and iphones. a major win for apple. monday, august 5th, 2013. "squawk box" begins right now. >> good morning, everybody. welcome to "squawk box" on cbc.
i'm becky quick. joe is on vacation. brian sullivan is joining us this morning. thank you for being here. >> i didn't want to be here. >> you are. >> i was told to come in. >> you're so thrilled to be here. so glad on a monday morning to be here. >> the good music helps. lumineers. >> i love this. politico's ben white of morning money fame. barry knapp. barclays head of u.s. equity portfolio strategy. having trouble talking this morning. we do have a lot to talk about with all of these folks today. first a roundup of some of the top stories. the obama administration has overturn add u.s. trade panel's ban on the sale of some older iphones and ipads. this move reverses a ruling that had favored samsung over apple in that long running patent battle. the u.s. trade representative says that the decision was based in part on the effect of the competitive conditions in the u.s. economy and the effect on u.s. consumers. this is big news, though. shares of samsung were actually down overnight. just about 1%. e